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Understanding the Rise of Joy Global’s Stock ahead of Its Fiscal 3Q16 Earnings

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Nov. 20 2020, Updated 11:07 a.m. ET

Joy Global’s stock performance

Joy Global’s (JOY) stock has been on a downward trend since January 2015, when the stock started falling due to the oversupply in commodities markets and capital expenditure cuts by mining customers. But the stock witnessed a sudden rise at the start of June 2016, and JOY has gained ~28.6% since May 1, 2016. By comparison, as of August 12, 2016, the Energy Select Sector SPDR Fund (XLE) has increased by ~2.0% YoY (year-over-year).

The increase in JOY’s stock price stemmed from its fiscal 2Q16 earnings surprise and from anticipations of major upcoming events. As of August 12, 2016, Joy Global has gained ~130.7% YTD (year-to-date).

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Market reaction to acquisition news

Japanese mining equipment maker Komatsu has agreed to buy US-based Joy Global (JOY). The news was announced on July 21, 2016, before market hours, sending JOY’s shares up during early trading. The stock rose by 19.7% from its opening price of $23.5 and closed at $28.2.

Caterpillar (CAT), Terex (TEX), and Illinois Tool Works (ITW) are among the major mining equipment industry peers and have gained 21.4%, 16.6%, and 28.3%, respectively, YTD as of August 12, 2016.

ETF investments

JOY is a part of the SmallCap Earning Fund ETF (EES) and accounts for 1.4% of the fund’s total holdings. Investors in this ETF should benefit if JOY continues to perform well in the current weak and volatile market. EP Energy Corp A (EPE) and Evolent Health (EVH) are among the top ten holdings of EES, accounting for 1.7% and 1.3%, respectively, of the ETF.

But how much will Komatsu pay to acquire Joy Global? Continue to the next part to find out.

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